My Size, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2023; comparisons are with the quarter and nine months ended September 30, 2022. Financial amounts are in U.S. dollars, thousands, unless otherwise stated. My Size combines AI-driven SaaS measurement solutions with an online fashion and equipment retailer, Orgad, and acquired SaaS business Naiz Fit. Its filing says nearly all revenue to date has been generated as a third-party seller on Amazon.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $2,156 | $726 | $4,166 | $1,931 |
| Gross profit (loss) | $1,376 | $(151) | $1,468 | $324 |
| Gross margin | 63.8% | (20.8%) | 35.2% | 16.8% |
| Operating loss | $(1,105) | $(1,975) | $(5,151) | $(5,732) |
| Net loss | $(1,132) | $(2,026) | $(5,077) | $(5,930) |
| Basic and diluted loss per share | $(0.44) | $(2.00) | $(2.19) | $(5.75) |
- Revenue and margins: Revenue increased 197% in Q3 and 116% for the nine-month period. Management attributed the gains mainly to higher Orgad sales and Naiz Fit revenue, as well as Orgad being consolidated for a longer period in 2023. Q3 gross profit improved from a loss; nine-month gross margin also rose. The nine-month cost of revenue included a $643 inventory write-down related to the warehouse fire.
- Expenses and losses: Q3 operating loss narrowed 44%; the nine-month operating loss narrowed 10%. Nine-month R&D expense fell to $811, while sales and marketing rose to $2,598 and G&A to $3,210. Management cited lower headcount and subcontractor costs for lower R&D, higher Amazon fees for sales and marketing, and acquisition-related salaries and professional fees for higher G&A.
- Cash flow: Nine-month operating cash use was $4,910, compared with $5,858 in 2022. Investing cash flow was zero, versus $327 used in 2022. Financing provided $6,230, versus $39 used in 2022, principally reflecting 2023 offerings. Cash, cash equivalents and restricted cash increased to $3,767 from $2,363 at year-end 2022.
- Liquidity and debt: At September 30, cash and cash equivalents were $3,695, restricted cash $72, and current assets $8,070 against current liabilities of $4,573 (working capital of $3,497). Bank overdraft and short-term loans were $230, with long-term loans of $268; operating lease liabilities totaled $293. Management expects continued losses and negative operating cash flow and says available cash is expected to fund operations for less than 12 months, creating substantial doubt about the Company’s ability to continue as a going concern.
- Equity: Stockholders’ equity was $5,932, compared with $4,536 at year-end 2022. Shares outstanding increased from 1,464,117 to 2,981,792; the filing reports the January financing and August warrant exercise, and notes additional warrants that could cause dilution.
Material changes, outlook and risks
- Business and operations: Effective July 1, 2023, the Company combined its two SaaS segments into one, leaving Fashion and equipment e-commerce and SaaS Solutions. For the nine months, Fashion and equipment e-commerce generated $3,732 revenue and a $2,936 operating loss; SaaS Solutions generated $434 revenue and a $2,215 operating loss. In May, it shifted support, development and customer success operations to Spain and cut 13 Israel-based positions; management expects lower future costs without significant revenue impact. Orgad shifted toward Amazon fulfillment, which management says reduces inventory exposure and improves efficiency.
- Financing and dilution: January offerings generated approximately $3.0 million gross and $2.6 million net. In August, a warrant holder exercised warrants at a reduced $2.09 per share, generating about $4.2 million gross and $3.6 million net, in exchange for new warrants to purchase up to 5,367,912 shares at $2.09. Issuance of the new warrant shares is subject to stockholder approval. The filing also describes option repricing for certain officers and directors.
- Fire and litigation: A January 2023 fire destroyed approximately $640 of uninsured Orgad inventory; the Company recorded a $643 write-down and paid the lessor $50. Neighboring warehouse owners alleged fire-related damage; as of the filing, no lawsuit had been filed and any potential loss could not be reasonably estimated. In the North Empire dispute, the appellate court affirmed denial of both parties’ summary judgment motions and returned the case to the trial court. Mediation in July did not settle the matter; the Company says it believes North Empire’s counterclaims are more likely than not to be denied.
- Israel and Russia: The October 2023 Israel-Hamas war occurred after quarter-end. The Company said the impact on operations and results had been immaterial so far, but it could not predict the conflict’s duration or ultimate effect. It also reported scaling back Russian subsidiary operations and expecting to close them in the near future, citing the Ukraine invasion and sanctions.
- Listing risk: Nasdaq notified the Company on November 3, 2023 that it did not meet the minimum bid-price requirement. The initial compliance deadline is May 1, 2024. The filing discusses a possible additional compliance period but contains an apparently inconsistent reference to “July 5, 2022” as a deadline; investors should verify the correct timing with subsequent filings.
- Other outlook and accounting risks: No quantified revenue or earnings guidance is provided. Goodwill was not impaired at September 30, but the SaaS reporting unit’s estimated fair value was only 2.7% above carrying value; future impairment is possible if projections or valuation assumptions change. Management’s ability to continue operations depends on commercialization and obtaining further financing, which may not be available on acceptable terms or at all. The filing also cites customer adoption, acquisition execution, competition, cybersecurity, litigation, capital-market conditions and Israeli political and security conditions as risks.
Important facts for investors to verify
- Cash runway, projected cash needs and the availability and terms of additional financing given the going-concern warning.
- Potential dilution from outstanding warrants, including the 5,367,912 new warrant shares subject to stockholder approval, and the effect of further warrant exercises.
- Progress toward Nasdaq bid-price compliance and the correct deadline for any subsequent compliance period.
- Actual sales, margins and cash generation from Orgad and Naiz Fit, including whether the shift to Amazon fulfillment and the Spain restructuring deliver expected benefits.
- Developments in the North Empire litigation and any claims or losses arising from the warehouse fire.
- Effects of the Israel-Hamas war and the planned wind-down of Russian operations on business continuity and results.